Colleges that choose to avoid issues important to their audience and relevant to the management of our respective endowments, risk “withering on the vine” irrespective of portfolio performance.
By Mike Fiorio, Trutee, Northland College
As a trustee advisory council member with the Intentional Endowments Network (IEN), I recently participated in a quarterly conference call with my fellow trustees from institutions across the country. The subject to which we devoted most of our time was how to encourage more colleges and universities to become interested in aligning their endowments with their mission by considering Environmental, Social, and Governance (ESG) issues in investments because they are material to financial performance and the health and well-being of society. With the existential challenge of climate disruption, this includes the divestment of fossil fuels from their respective endowments.
The conversation quickly devolved into one of performance: Portfolio returns with fossil fuels versus those without. While performance is an essential component of a fiduciary’s responsibility, there are other vital responsibilities to consider in relation to higher education institutions. First and foremost is ensuring that our respective institutions remain viable and relevant to our current and prospective students. Absent stable or rising enrollment numbers, trustees have other issues to consider besides endowment performance alone.
The photo included below is from a “climate strike” held in Montreal on 27 September 2019, where an estimated 500,000 people marched, mostly high school, college, and university students. My two stepsons were among those led by Greta Thunberg. The Montreal event was not an outlier. These climate strikes occurred across North America and the globe. These young people are much like Ms. Thunberg; they are exasperated by inaction from us – Baby Boomers or “OK Boomers” as the students call us.
Our target audience for student recruitment considers us to be out of touch at best or greedy, or worse. If our respective boards of trustees do not start listening to current and incoming students, other institutions will entice them to their rosters at our expense thereby further eroding student enrollment. Colleges that choose to avoid issues important to their audience and relevant to the management of our respective endowments, risk “withering on the vine” irrespective of portfolio performance. This is a paradigm shift away from the old arguments centered around fossil-fuel inclusion in the endowment portfolio.
Future students will demand more action on climate issues because of the impact on their lives and those of their children. Indeed, it is happening already: Students at Northland College were agitating for change when I joined the board and partnered with them to lead the way to effectuate fossil fuel divestiture at our institution. As a trustee and member of the Investment Committee at Northland, I refocused the discussion after a decade of conversation and inaction. Subsequent to much research on alternative investments that would meet acceptable performance goals, Northland’s endowment is now 100% fossil-free.
We concluded this was the right move from many perspectives – fulfilling our mission, aligning with our values, attracting the best students, and protecting our endowment capital in both the short- and long-term. We believe that fossil-free and other ESG investment strategies can reduce risk, and perform as well or better than ‘conventional’ investment strategies. A recent report found that 94% of foundations that committed to divestment five years ago have experienced positive or neutral impacts on their financial performance. The body of evidence supporting the financial case for ESG continues to grow, and IEN’s website includes a library of studies and reports demonstrating this. Perhaps more to the point, as the CEO of Legal & General (one of the 10 largest investment managers in the world) recently wrote, “asset managers must recognise one overarching fact: the success of companies over the long term is inseparable from the sustainability of the societies in which they operate.”
I expect this will not be the last time we move the portfolio toward greater ESG responsibility given positive outcomes. Of note, Northland’s 2019 growth in fall enrollment exceeded all other private college and university trends in Wisconsin. In my opinion, this success is a consequence of Northland’s environmental and sustainability focus, as well as initiatives that “walk the talk.”
Some highlights of Northland’s sustainability achievements in this past year include:
- Added sustainable agriculture as an academic program;
- Built a “high tunnel” to extend the growing season for produce served in the campus cafeteria;
- Completed one-year inventory for the Real Food Challenge;
- Composted an estimated 170,000 pounds of food waste (a 77% increase from the previous academic year); and
- Northland College and its student association purchased 30 kilowatts of solar energy shares from the Xcel Energy Corporations’ Solar Connect Community Garden.
- Northland College has committed to become carbon neutral in its operations by 2030.
All these initiatives have prospective students, environmental organizations, and the press taking notice. Sierra Magazine, a publication of The Sierra Club, ranked Northland College 26 on its “Cool Schools” list of the eco-savviest colleges and universities. “For thirteen years, Sierra has been ranking colleges according to which ones offer the best sustainability-focused courses, eco-friendly cafeteria provisions, and carbon neutral land and energy policies, as well as the most opportunities to engage with the environmental movement.” Sierra Magazine 2019.
Of the 282 schools Sierra considered, Northland rose up from 55 in 2018 to 26 in 2019, subsequent to divestiture. Northland was ranked 6 – up from 14 – among undergraduate colleges and remains first in Wisconsin and the Midwest. Northland College Magazine Fall 2019 “In addition to the Sierra rankings, the Association for the Advancement of Sustainability in Higher Education named Northland College top in the nation for a sustainability curriculum. More than 80% of faculty incorporate sustainability into the classroom. Most recently, the Princeton Review’s “Top 50 Green Colleges” ranked Northland 16.” Id.
Why is this important? According to a 2019 Education Advisory Board (EAB) industry study titled, “Remaining Relevant Amidst Competitive Disruption,” college enrollment is predicted to decline by 14% from 2026-2029. Additionally, there are proposed federal and state-led free college initiatives that will potentially increase competition for the declining pool of prospective students. It is time to be forward-thinking and approach the higher education boards to discuss divesting endowment portfolios from fossil fuels. The sooner we focus and listen to what our prospective students demand, the better – simply hoping the students will keep attending private colleges is not a strategy. Instead, action to divest from fossil fuels in the endowment portfolio is critical to both the existence of our colleges and to the planet.